This implies that once the higher provisions and risk weights (if applicable) on restructured advances (classified as standard either abinitio or on upgradation from NPA category) revert to the normal level on account of satisfactory performance during the prescribed period, such advances should no longer be required to be disclosed by banks as restructured accounts in the “Notes on Accounts” in their Annual Balance Sheets.
24.3 The general principle of restructuring should be that the shareholders bear the first loss rather than the debt holders.

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As such project loans will be treated as standard assets in all respects, they will attract standard asset provision of 0.40 per cent. Widely taught 3, 4 methods of sizing an NPA include comparing an NPA to the width of the patients little finger or nares. The servicing agreement should provide for such verifications by the auditors of the purchasing bank.

12.1.1 Banks may restructure the accounts classified under 'standard', 'sub- standard' and 'doubtful' categories. (@ 40 per cent of the secured portion), Rs.1.85 lakhs All financial institutions and banks should participate in the system in their own interest. 3 /20.16.003/2013-14 dated July 1, 2013 on ‘Wilful Defaulters’ updated from time to time. Selling bank shall ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank and after the sale there should not be any known liability devolving on the selling bank. (ii) In the case of consortium / multiple banking arrangements, if 75% (by value) of the banks / FIs decide to accept the offer, the remaining banks / FIs will be obligated to accept the offer.

The definition of the terms Micro Enterprises, Small Enterprises, and Medium Enterprises shall be in terms of Master Circular RPCD.SME&NFS.BC.No. In such cases, where the lending bank is able to establish through documentary evidence that the importer has cleared the dues in full by depositing the amount in the bank abroad before it turned into NPA in the books of the bank, but the importer's country is not allowing the funds to be remitted due to political or other reasons, the asset classification may be made after a period of one year from the date the amount was deposited by the importer in the bank abroad. However, the JLF may review the reasons for classification of the borrower as a wilful defaulter and satisfy itself that the borrower is in a position to rectify the wilful default. With this principle in view and also to ensure more ‘skin in the game’ of promoters, JLF/CDR may consider the following options when a loan is restructured: Possibility of transferring equity of the company by promoters to the lenders to compensate for their sacrifices; Promoters infusing more equity into their companies; Transfer of the promoters’ holdings to a security trustee or an escrow arrangement till turnaround of company.

15. If for any reason, an asset is allowed to remain in books, 100 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component should be provided for. 1 0 obj in respect of the non­performing financial assets purchased by it. Further, the creditors shall agree that if 75 per cent of creditors by value and 60 per cent of the creditors by number, agree to a restructuring package of an existing debt (i.e., debt outstanding), the same would be binding on the remaining creditors. CDR Core Group may take a final decision whether a particular case falls under the CDR guidelines or it does not.


b) Unsecured (as defined in paragraph 5.4 above) lease exposures,, which are identified as ‘substandard’ would attract additional provision of 10 per cent, i.e., a total of 25 per cent.

Further, the CDR Mechanism was made available only to the borrowers engaged in industrial activities. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value. The sharing pattern shall be as determined by the Standing Forum. 5.1.4 The accounts where recovery suits have been filed by the creditors against the company, may be eligible for consideration under the CDR system provided, the initiative to resolve the case under the CDR system is taken by at least 75% of the creditors (by value) and 60% of creditors (by number).

Part B, Advances Guaranteed by Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) – Risk Weights and Provisioning, Prudential Norms on Advances to Infrastructure Sector, Disclosure Requirements on Advances

4.2.20 Transactions Involving Transfer of Assets through Direct Assignment of Cash Flows and the Underlying Securities. 6����LT,gUVuNEVֹ��j��w��A�)5dك��l�=j�P��&)����k���Z���Rs�)�4U-$6�`HD�2�D���M��|z|2=����g'=��D�v� �5�䲒%��ݐg4��C��,�zw�t�����?^\M��9~>y7=������TN�ޢ����=ࠅ�| Equity classified as standard asset should be valued either at market value, if quoted, or at break-up value, if not quoted (without considering the revaluation reserve, if any) which is to be ascertained from the company's latest balance sheet. 2. 4.2.5 Upgradation of loan accounts classified as NPAs. Project Loans for Non-Infrastructure Sector (Other than Commercial Real Estate Exposures). With regard to upgradation of a restructured/ rescheduled account which is classified as NPA contents of paragraphs 12.2 and 15.2 in the Part B of this circular will be applicable.

Such projects should ordinarily not include non-residential commercial real estate.

The cost in operating the CDR mechanism including CDR Cell will be met from contribution of the financial institutions and banks in the Core Group at the rate of Rs.50 lakh each and contribution from other institutions and banks at the rate of Rs.5 lakh each. It should be ensured that the lending institutions complete all the formalities in seeking the approval from BIFR before implementing the package. xii) The selling bank shall pursue the staff accountability aspects as per the existing instructions in respect of the non­performing assets sold to other banks. ), closing balances, provisions held, technical write-offs, etc. The FITL / debt or equity instrument created by conversion of unpaid interest will be classified in the same asset classification category in which the restructured advance has been classified. 5.6.2 Principle for utilisation of floating provisions by banks.

b. Additional Provisioning Requirement for Standard Assets, Prudential norms on creation and utilization of floating provisions, Annual Policy Statement for the year 2006­-07: Additional Provisioning Requirement for Standard Assets, Revised Guidelines on Corporate Debt Restructuring(CDR) Mechanism, Debt restructuring mechanism for Small and Medium Enterprises (SMEs), Mid­ Term Review of Annual Policy Statement for the year 2005­06: Additional Provisioning Requirement for Standard Assets, Debt restructuring mechanism for Small and Medium Enterprises (SMEs) ­Announcement made by the Union Finance Minister, Guidelines on purchase/sale of Non performing Assets, Repayment schedule of rural housing loans, Prudential norms – State Government guaranteed exposures, Flow of credit to 4.2 Guidelines for classification of assets.

principal and interest on all facilities in the account are serviced as per terms of payment during that period. iv. The pool of assets would be treated as a single asset in the books of the purchasing bank.

The term 'Advances' will mean all kinds of credit facilities including cash credit, overdrafts, term loans, bills discounted / purchased, factored receivables, etc.

transactions relating to securitization and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure any loan or advances granted by banks and financial institutions, as defined under the SARFAESI Act, are to be registered in the Central Registry.

The asset classification of these loans would thereafter be governed by the revised terms & conditions and would be treated as NPA if interest and/or instalment of principal remains overdue for two crop seasons for short duration crops and for one crop season for long duration crops. Key concepts used in these guidelines are defined in Annex - 5. Such loans should be substantially taken over (more than 50% of the outstanding loan by value) from the existing financing banks/Financial institutions. The provisioning on these assets would revert to 0.40 per cent after 1 year from the date on which the rates are reset at higher rates if the accounts remain ‘standard’.

(iv) When banks/ FIs invest in the security receipts/ pass-through certificates issued by SC/RC in respect of the financial assets sold by them to the SC/RC, the sale shall be recognised in books of the banks / FIs at the lower of: The above investment should be carried in the books of the bank / FI at the price as determined above until its sale or realization, and on such sale or realization, the loss or gain must be dealt with in the same manner as at (ii) and (iii) above. ifak issue with the bonus of lubes packet making it easier to insert. These measures are intended to turn-around the entity/company without any change in terms and conditions of the loan. Provisioning Pertaining to Advances - Projects under Implementation, Second Quarter Review of Monetary Policy for the Banks should maintain following provisions on such accounts as long as these are classified as standard assets apart from provision for diminution in fair value due to extension of DCCO: If the revised DCCO is within one year from the original DCCO prescribed at the time of financial closure, If the DCCO is extended beyond one year and upto two years from the original DCCO prescribed at the time of financial closure. 36.2 Boards of banks should put in place a policy for timely submission of credit information to CRILC and accessing information therefrom, prompt formation of Joint Lenders’ Forums (JLFs), monitoring the progress of JLFs and adoption of Corrective Action Plans (CAPs), etc.
Further, the amount of principal converted into debt/equity instruments on restructuring would need to be held under AFS and valued as per usual valuation norms. Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Illustratively, divergences could occur if banks are not appropriately factoring in the term premium on account of elongation of repayment period on restructuring.

(iii) The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions ­Others' in Schedule 5 of the balance sheet. The benchmarks for the viability parameters adopted by the CDR Mechanism are given in the Appendix to Part – B of this Master Circular and individual banks may suitably adopt them with appropriate adjustments, if any, for specific sectors while restructuring of accounts in non-CDR cases. {(Row 8/Total of Column 3 of Row 4)*100}, If PCR < 70%, shortfall in provisioning to achieve PCR of 70% (70% of Column 3 of Row 4 - Row 8), Countercyclical Provisioning Buffer, if bank has achieved PCR of 70% - Floating Provisions for advances to the extent not used as Tier II capital (Row 5).

The condition of being fully secured by tangible security will not be applicable in the following cases: (a) MSE borrowers, where the outstanding is up to Rs.25 lakh.